One might wonder if the exceptionally strong rally off the summer correction could negatively impact seasonal strength this year. The S&P 500 was up 8.3% last month—the fifth best October market performance since 1960.
Historically, strong summer-end rallies have rarely detracted from emerging seasonal strength in November. October gains exceeding 5% have occurred 9 times since 1960, and each time, the subsequent November-April period turned in a strong performance. Six out of the 9 instances saw double-digit gains, and each of those came after a rebound off a steep correction or a prior bear market low.
Bottom line, despite potential volatility surrounding the December Fed meeting, traditional seasonal strength should be on the side of the bulls over the next few months.
James Stack, InvesTech Research, www.investech.com, 800-955-8500, November 13, 2015